Chemours CEO sees ‘normal’ TiO2 destocking, Opteon growth

CEO Mark Vergnano sees a ‘normal’ TiO2 destocking trend through Q1 2019, while growth in Opteon continues strong

US-based Chemours views the titanium dioxide (TiO2) destocking trend as normal and expects this to continue through the first quarter of 2019. However, the company expects demand for its Opteon low global warming potential (GWP) refrigerant to continue growing strongly as it brings on a worldscale project by the end of the year.

“We see this as normal destocking. If you look at last year, [our TiO2] volumes were up 8%, which is above GDP. There was stocking of inventories in the channel because prices were going up,” said Mark Vergnano, CEO of Chemours, in an interview with ICIS.

“In 2018, prices have stabilised, and we brought in Ti-Pure TiO2 Value Stabilization (VS), so there’s not a need to pre-buy. So normally we see customers in the channel destocking. It’s hard to call when it starts and ends, but it started earlier than we anticipated, and we see this continuing through Q1 2019,” he added.

Through the first three quarters of 2018, Chemours has seen its TiO2 volumes fall 2%. Chemours is seeing destocking across all geographies in relatively equal amounts, reflecting a “true destocking phenomenon” rather than a loss in market share, he said on the company’s Q3 earnings call.

Chemours is tracking to its goal of having the majority of TiO2 sales under its VS programme, which provides customers flexibility of volumes at more stable pricing. Vergnano said Chemours should reach that goal from now through 2019.

In Chemours’ Titanium Technologies segment, volumes in the third quarter fell 10% year on year while prices were up 9%. Sales were down 1% to $791m while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 8% to $268m.

Chemours is staying disciplined on TiO2 pricing, even at the expense of potential volume loss, the CEO noted.

“We are holding pricing. Our price point is the right one for our customers and also gives us reinvestment economics to grow with them,” said Vergnano. “You won’t see us move on local price. Volumes will fluctuate and we’ll see where that lands. We expect there will be some volume loss.”

Chemours expects its Ti-Pure TiO2 volumes for all of 2018 to be down in the mid-single digits versus 2017.

BIG PICTURE, CHINA

However, looking at the big picture in TiO2, there is no significant new capacity coming on stream, while demand grows at GDP levels, he noted.

“Customers are looking for a consistent supplier and we very much believe in our strategy. We have a unique product and help customers develop new applications – that’s where we invest in technology,” said Vergnano.

Increasing TiO2 exports from China are likely not the result of major new capacity additions, but a result of the slowing local economy, he noted.

“China’s economy has slowed, and so more product is coming out of China as exports. But we don’t see it intercepting our business as they are different grades. TiO2 is not fungible,” said Vergnano.

OPTEON PROJECT ON TRACK

On the fluoroproducts side, Chemours is on track to complete its $300m Opteon hydrofluoroolefins (HFO) refrigerants project in Corpus Christi, Texas, by the end of the year while growth continues to be driven by regulations.

“The project is on track and we should have saleable product next year. We are happy with the progress of the HFO project, which will be the largest and lowest cost plant in the world,” said Vergnano.

Opteon sales have been growing in the mid-20% range through 2018, he noted. The HFO is enjoying rapid growth as governments require increasing use of refrigerants with low GWP.

Going forward, penetration into the US auto air conditioning market is set to rise from around 50% today to 100% by 2021. And the company is targeting the stationary side of refrigerant use – in commercial chillers and residential and commercial building air conditioning systems, the CEO said.

“On the regulatory side, we’re seeing more movement in the states where 16 US states are doing their own regulations to move to HFOs faster,” said Vergnano.

Opteon accounted for 45% of Chemours’ fluorochemicals sales in 2017. Fluorochemicals, along with fluoropolymers, comprise the company’s fluoroproducts segment, which had sales of $2.65bn in 2017.

In the third quarter of 2018, Chemours’ fluoroproducts segment saw a 7% gain in sales year on year to $682m, while adjusted EBITDA surged 15% to $182m.

In fluoropolymers, Chemours is seeing strong demand from the semiconductor manufacturing market, which is a key end market along with consumer electronics and automotive.

“We see a very strong seminconductor market driving fluoropolymers growth and feel very good about it through 2019,” said Vergnano.

He also sees good momentum in Chemours’ chemical solutions segment, which in the third quarter saw sales gain 5% to $155m and adjusted EBITDA jump by 33% to $24m. “Chemical solutions had a great quarter and we are expanding margins there,” said Vergnano.